"It will not be a short or easy avenue to walk on but we started to walk on it and we will continue," Serri added.

The EU froze and suspended more than 360 million Euros (325 million dollars) in long-term development aid to Ethiopia after the war between the two countries broke out in May 1998, according an Ethiopian government study.

Seyoum said: "We are in a post conflict situation, we are in the process of peace building. Europe understands how challenging peace building is."

Italy will give Ethiopia 156 million Euros (140 million dollars) over three years for development projects, Serri said.

"We want to immediately relaunch bilateral relations between Italy and Ethiopia, as well as the European Union and Ethiopia in development, political and economical cooperation," he said.

The two countries signed an agreement in Algiers on December 12 to formally end a war in which tens of thousands of people have died and more than a million have been displaced.

In November, the United Nations began deploying the first troops of a peace keeping force that will eventually number some 4,500 men.

"Peace between Ethiopia and Eritrea is an important contribution for the region of the Horn of Africa," Serri said.

UN Secretary General Kofi Annan called on the international community to provide generous support for the two countries on December 8.

Eritrea gained full independence from Ethiopia in 1993, a secession that was agreed to by Addis Ababa -- ADDIS ABABA (AFP)